UK Public Sector Net Burrowing in Surplus

The United Kingdom’s (UK) public sector current budget experienced a deficit of £12.4 billion over the month of April 2012, according to the Office for National Statistics on Tuesday. This was £4.4 billion greater than the deficit in April the year before when the deficit amounted to £8.8 billion. Yet, the region’s net borrowing dropped to -£16.5 billion (a surplus) during the month of April (2012) lowering £25.6 billion from £9.1 billion in April 2011. April 2012’s figures include a large one-off transfer to government of £28 billion (part of the transfer of the Royal Mail Pension Plan).

The UK consumer price index (CPI) inflation lowered 0.5 points to 3.0% in April 2012 from the month before at 3.5%, according to other data published by the Office for National Statistics on Tuesday. A lower annual rate was last seen in December 2009 and a comparable 3.0% inflation rate was seen in February of 2010. The largest drivers for the annual decrease between March and April 2012 included air transport, off-sales of alcohol, clothing and sea transportation. On the other hand, the largest factors for upward pressure to the annual CPI resulted from the operation of personal transport equipment, restaurants & hotels and rents.

The retail price index (RPI) annual inflation came to 3.5% in April, lowering 0.01 points from March at 3.6%, with the annual rate not lower since December 2009. Downward pressures included alcoholic drinks, clothing, fares & other travel and the purchase of motor vehicles while upward pressures included housing and petrol & oil.

The GBPUDF has traded in a range between 1.5760 and 1.5830 over the last several days and we saw the pair testing support after the economic announcements but the pair failed to break below. The long term trend is down but in the short term we expect to see the pair trading sideways. 

Eugene Ross, Analyst

Admiral Markets

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